Dollar down: a world on edge

Since January 2025, the U.S. dollar has lost more than 10% of its value against major global currencies a decline not seen in over half a century. The mix of Donald Trump’s erratic trade policies and his open clashes with the Federal Reserve have shaken confidence in the world’s most widely used currency. The consequences ripple far beyond Washington, reshaping trade, finance, and the balance of economic power.

Since returning to the White House, Donald Trump has flooded markets with uncertainty. His administration has oscillated between promises of deregulation and sudden tariff threats, culminating in his August 1st announcement that countries without trade deals with Washington will face new surtaxes. This unpredictability has left global investors wary.

On top of trade tensions, Trump has taken repeated aim at the U.S. Federal Reserve and its chairman, Jerome Powell. Traditionally seen as an anchor of stability, the Fed’s independence is being called into question. By openly pressuring Powell to adopt looser monetary policy, Trump has rattled market confidence. The perception that the Fed is no longer insulated from politics has driven investors to seek safer havens and to sell off dollars.

The dollar down, the Euro up

The immediate result is clear: the dollar has weakened, and the euro has surged. Today, one euro is worth about 85 cents, a sign of a stronger European currency. On paper, this looks like a win for Europe but exporters see it differently. A stronger euro makes European goods more expensive on world markets, eroding competitiveness against American products priced in cheaper dollars.

For the United States, however, a weaker dollar offers short-term relief. Exports become more affordable abroad, potentially boosting manufacturing jobs and narrowing the trade deficit. American tourism is also on the rise: Europeans can now travel to New York or Los Angeles at a relative bargain. Yet despite the dollar’s slide, the euro still lacks one crucial advantage the status of a true global reserve currency.

Winners, losers, and shifting power

The depreciation of the dollar isn’t just a currency story; it’s a geopolitical one. When the world’s benchmark currency falters, trade patterns shift. Oil contracts, global debt, and cross-border payments are still overwhelmingly denominated in dollars. A weaker greenback makes repaying dollar-denominated loans cheaper for some emerging economies but it also introduces new volatility.

Meanwhile, commodities tell their own story. As the dollar weakens, gold is shining again. Investors are flocking back to precious metals as a hedge against monetary instability. This move recalls earlier eras when currencies lost credibility, and tangible assets became the ultimate refuge.

Toward a currency war?

What truly worries economists is the specter of a global “currency war.” If Washington actively embraces a weak dollar policy while Europe, Asia, and emerging markets scramble to defend their own currencies, the risk of competitive devaluations rises. Such a scenario could fracture the international monetary system and increase the likelihood of financial crises.

Already, some nations are preparing for life with less dollar dominance. The BRICS bloc (Brazil, Russia, India, China, South Africa, and new partners like Saudi Arabia) has accelerated its push for bilateral trade in local currencies. At their recent summit, leaders touted efforts to bypass the dollar in energy and commodity deals. Each step in this direction chips away at the dollar’s monopoly over global trade.

A turning point in monetary history?

Is this just another downturn, or the start of something bigger? The U.S. dollar has been written off before after the collapse of Bretton Woods in the 1970s, during the Asian financial crisis of the 1990s, and after the 2008 crash. Each time, it bounced back. But today’s environment is different. The combination of political pressure on the Fed, escalating trade disputes, and coordinated efforts by emerging powers to diversify away from the dollar suggest deeper structural changes.

For now, America enjoys the benefits of cheaper exports and stronger tourism flows. But the broader picture is less flattering: trust in U.S. institutions is eroding, and rivals are actively building alternatives to a dollar-centric system. The greenback may remain the dominant currency, but its aura of invincibility has cracked.

In the end, the dollar’s fall is more than a financial story. It’s a signal that the global economy is entering a new phase less stable, more fragmented, and increasingly multipolar. Whether this slide becomes a slide into chaos depends on how Washington, and the rest of the world, choose to respond.